The typical thinking in dealing with the unsustainable, bailed out economies of Greece and Portugal (and, to an extent, Ireland) has been to impose harsh austerity measures aimed at cutting down the size of governments and making business policies more competitive. However, this has entailed steep cutbacks that have stretched throughout the economy, and the sharp drawdown in demand has cut into the revenues of the entire euro area.

In December, EU leaders agreed to a fiscal compact that would be part of a new EU Treaty. It would impose automatic sanctions on any country that failed to adhere to new restrictions on the amount of money governments can spend and those who refuse to cut their public debts to about 60 percent of GDP.

But Greeks are not alone in growing more resistant towards austerity. Critics of current plans are concerned that they are more targeted at making sure Germany and other creditors are paid and less geared towards actually returning economies to long-term growth. Since Merkel and Germany have been the primary proponents of the current position, they have come under increasing fire from leaders and EU citizens outside Germany.

Opposition to German leadership manifested in the most recent round of French presidential elections. That vote not only brought an end to the leadership of conservative Nicholas Sarkozy but to his partnership with the German Merkel. Indeed, the credit for his loss can be attributed--at least in part--to French distaste for his willingness to bend to Merkel's will.

The new Socialist French President, Francois Hollande, has since championed a much more activist response to the crisis, and even campaigned to rewrite the new Treaty to include a pro-growth component.

The current obstacles:

Unsurprisingly, the relationship between Merkel and Hollande has proved tenuous. His public support for eurobonds--which would force Germany to guarantee the debts of less creditworthy countries like Italy and Spain--has led Italian PM Mario Monti and Spanish PM Mariano Rajoy to speak out in favor of such measures as well.

Their disagreements dominated the latest EU Summit on May 23, and investors have begun betting that Italy and Spain might soon need help from international lenders to stay afloat.

Because the three leading Greek political parties each failed to form a coalition, Greeks will have to return to the polls and vote again. Tsipras and his anti-bailout cohorts insist that EU leaders will give in and revise demands for more austerity. EU leaders, on the other hand, insist that this vote is a referendum on Greece's membership on the European Monetary Union, and that the terms of the bailout are nonnegotiable. While 75 percent of the Greek population supports the country's membership in the euro currency, about 65 percent disagree with the austerity measures.

The game of chicken between EU and Greek leaders has led more and more economists to believe that Greece might be forced to exit the euro currency, perhaps in the short term. Should EU leaders make good on their promises, and should Tsipras and SYRIZA win enough support to form an anti-bailout government after a new round of elections on June 17, they argue, EU leaders will withhold the next round of bailout funding. Greece would not be able to pay off its debts, and thus default in a disorderly fashion.

Such a default would hit Greece's international lenders most severely, and it is unlikely that the ECB would continue to interact with a government that had directly disobeyed euro rules. Thus Greece would be forced out of the euro area. Should Greece leave, investors fear, it would compromise the fundamental tenets of the union itself. Thus, people and companies would withdraw money en masse from banks in Portugal, Ireland, Spain, and Italy, fearing that they, too, would choose devaluation and an exit from the euro area rather than years of recession and austerity.

Many other economists point out that fears of an immediate euro exit are overblown. A disorderly Greek exit would cause panic and upset the entire European banking system, and force countries like Germany to make structural changes to the monetary union that they are not willing to do yet. Some strategists also argue that recent campaigns by EU leaders to convince Greeks that their next election decision is a referendum on the euro have been successful, and that voters are moving back towards PASOK and New Democracy.

Investors look to ECB President Mario Draghi to take strong action should the crisis spiral out of control.AP/Riccardo De Luca

No matter what happens in the next round of Greek elections, it is clear that concerns about the viability of the euro are heating up once again. Germany and other Northern European countries are loathe to make concessions to support the South, and Italy, Spain, Greece, and Portugal are dipping into even deeper recessions.

More and more, analysts appear convinced that only the ECB has the power to truly "save" Europe in time. In particular, they are hoping for some kind of blanket guarantee by the ECB to buy an unlimited quantity of Italian and Spanish bonds, regardless of the implications for inflation.

However, the ECB argues that this would amount to "monetizing sovereign debt," something that is illegal under the EU treaty and not within the central bank's mandate. It has also reiterated that its commitment remains to price stability (i.e. keeping inflation under control), not growth or employment.

Ultimately, the conclusion to the crisis will only be true fiscal union, where Germany, Finland, the Netherlands, France, and other big economies will be able to transfer their wealth and business to the South. Solutions like eurobonds and a stronger central governance are not yet politically viable, but it seems apparent that Europe will need to become a lot more like the United States in order to survive.

Looking ahead:

The next big day for Europe is clearly June 17, when Greece will return to the polls.

Meanwhile, investors are concerned that withdrawals from European banks will intensify. There are signs that money is moving out of Greece and other peripheral European countries--a veritable "jog" on the banks.